OCC proposed a rule that would determine when a national bank or federal savings association makes a loan and is the “true lender” in the context of a partnership between a bank and a third party, such as a marketplace lender. The proposed rule would resolve this uncertainty by specifying that a bank makes a loan and is the “true lender” if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan. The deadline for comments on the rule is September 03, 2020.
A key objective of this proposal is to provide regulatory clarity and certainty that would enable banks and their partners to lend in a manner consistent with their business objectives and risk appetite and in compliance with the applicable laws and regulations. Identifying the lender would pinpoint key elements of the statutory, regulatory, and supervisory framework applicable to the loan in question. When a bank makes a loan, it is responsible for ensuring that the loan is made both in a safe and sound manner and in accordance with applicable laws and regulations, even if the loan is made in the context of a third-party partnership and even if the bank’s partner is the customer-facing entity. As the bank’s prudential regulator, OCC directly supervises these lending activities and ensures that the bank has instituted appropriate safeguards to manage the risks associated with the partnership.
There are also circumstances in which a bank is not named as the lender in the loan agreement but is still, in the view of OCC, making the loan. To ensure that the OCC rule would capture these circumstances, the agency is proposing a second standard based on which party funded the loan. Under this standard, if a bank funds a loan as of the date of origination, OCC concludes that it has a predominant economic interest in the loan and, therefore, has made the loan—regardless of whether it is the named lender in the loan agreement as of the date of origination. Under the OCC proposal, the determination of which entity made the loan under the above standards would be complete as of the date the loan is originated and would not change, even if the bank were to subsequently transfer the loan.
Comment Due Date: September 03, 2020
Keywords: Americas, US, Banking, True Lender Rule, National Banks, Federal Savings Associations, Credit Risk, Bank Lending, OCC
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.